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Government meeting

On measures to implement the Presidential Executive Order On Applying Certain Special Economic Measures to Ensure the Security of the Russian Federation.

Excerpts from Dmitry Medvedev’s introductory remarks

Briefing by Minister of Agriculture Nikolai Fyodorov

Government meeting

Dmitry Medvedev: Good afternoon, ladies and gentlemen. Before we start discussing the agenda, I would like to inform you of the following: For a long time, Russia has not responded to the so-called sanctions declared against it by certain countries. Until the last moment, we hoped that our foreign colleagues would realise that sanctions lead to a blind alley, and that no one benefits from them. But they didn’t realise this, and now we have been forced to respond.

Yesterday, the President of the Russian Federation signed an Executive Order On Applying Certain Special Economic Measures to Ensure the Security of the Russian Federation. This basically means an embargo on importing entire categories of products from those countries which have declared economic sanctions against Russian organisations and individuals. I have signed a Government resolution on enforcing this Executive Order.

Russia has completely banned the importation of beef, pork, fruits and vegetables, poultry, fish, cheese, milk and dairy products from the European Union, the United States, Australia, Canada and the Kingdom of Norway. Of course, this is a serious decision with regard to the distributors of these products from the above countries. At the same time, I would like to emphasise that these measures will not affect baby food imports. And, naturally, they don’t apply to products being purchased by individuals in these countries in line with our customs legislation.

Dmitry Medvedev: "Russia has completely banned the importation of beef, pork, fruits and vegetables, poultry, fish, cheese, milk and dairy products from the European Union, the United States, Australia, Canada and the Kingdom of Norway."

These restrictions shall be introduced starting today, and for a period of 12 months. But, if our partners display a constructive approach towards cooperation issues, then the Government would be willing to revise the specific implementation deadlines for these measures.

I hereby instruct the Federal Customs Service to carry out and enforce this directive as quickly as possible. In other words, it shall stop the shipment of the relevant products. The Ministry of Industry and Trade and the Ministry of Agriculture will start monitoring the commodity markets and price levels on a daily basis, and they shall report their findings to the Government.

I would also like to warn everyone that any attempts to obtain speculative profits from this situation will be stopped and held accountable. The Ministry of Agriculture, the Ministry of Economic Development, the Ministry of Industry and Trade and the Federal Anti-Monopoly Service shall enhance their cooperation with retail chain representatives and producers. They shall hold meetings and consultations, and they shall chart a joint action plan in order to compensate for product shortfalls and, of course, to prevent price hikes.

Government meeting

I have repeatedly stated that there is nothing productive about sanctions. We had a hard time deciding on retaliatory measures, and we were forced to make this decision. But I am confident that we’ll be able to take advantage of the situation even under these conditions.

While touring the country and meeting with farmers, we have repeatedly heard complaints that Russian retail chains and shops do not allow the sale of Russian foodstuffs. You have also heard and seen this many times. The retaliatory measures that we are introducing will essentially open up shop shelves for domestic producers. Of course, Russian farmers will have to accomplish a lot and work hard, but this opportunity to launch and expand import-substituting production facilities should not be missed. Naturally, our trade partners from other countries will still cooperate with us on the entire range of the above items.

Dmitry Medvedev: "The Ministry of Agriculture, the Ministry of Economic Development, the Ministry of Industry and Trade and the Federal Anti-Monopoly Service shall enhance their cooperation with retail chain representatives and producers. They shall hold meetings and consultations, and they shall chart a joint action plan in order to compensate for product shortfalls and, of course, to prevent price hikes."

The Food Security Doctrine that was approved four years ago is being implemented effectively with regard to a considerable number of foodstuffs. For example, grain, sugar, vegetable oil and potato production volumes now exceed the threshold levels being stipulated by the Doctrine. The same is true of poultry and, in principle, pork. 

Where we are lagging behind is in certain kinds of meat and milk. We should fill in the gap on our own, and our farmers are ready to do this, especially with our help. Again, I repeat: our trade partners from other countries are still working with us. I am sure that our market will be filled with fresh quality Russian products, which anyway many Russians prefer to the imported ones.

The next thing I’d like to focus on is that we are also developing measures to retaliate against the EU sanctions against Dobrolyot for its service to Simferopol. As you all know, on 4 August our first low-cost carrier was forced to suspend operations as a result of these unfriendly acts. All of its European partners refused to meet their obligations to lease, provide maintenance or insurance for planes or to provide air navigation data. This has brought many problems to our people that we’ve had to deal with. In this context, the Russian Government is considering a series of responses. I’ll name them. This doesn’t mean they’ll be taken right away, but they are on the table.

First, they include an airspace ban against European and US airlines that fly over our airspace to Eastern Asia, namely, the Asia-Pacific Region. This is a very tough measure indeed. Nevertheless, it should be mentioned.

Second, we are considering changing the so-called Russian airspace entry and exit points for European scheduled and charter flights. This, of course, will affect transportation costs and fare prices for the Western carriers.

Dmitry Medvedev: "We are also developing measures to retaliate against the EU sanctions against Dobrolyot for its service to Simferopol. As you all know, on 4 August our first low-cost carrier was forced to suspend operations as a result of these unfriendly acts."

Third, this country is ready to revise the rules of using the trans-Siberian routes, that is, to denounce the agreed upon modernisation principles of the existing system.   This revision will apply in full to the EU countries. We will also discontinue talks with the US air authorities on the use of the trans-Siberian routes.

Fourth, starting this winter, we may revoke the additional rights issued by the Russian air authorities beyond the previous agreements.

Dmitry Medvedev: "We’re referring to the suspension of Ukrainian airlines’ transit flights through Russian airspace to a number of countries – Azerbaijan, Georgia, Armenia and Turkey."

I’d like to emphasise that all these measures are not being introduced yet, but otherwise can be implemented either separately or together. As a result, the expenses of Western airlines will grow significantly. I repeat, we are only considering these steps now, but the Government has already taken one specific decision.

We’re referring to the suspension of Ukrainian airlines’ transit flights through Russian airspace to a number of countries – Azerbaijan, Georgia, Armenia and Turkey.

Finally, we’re potentially ready to adopt protective measures for the aircraft, shipbuilding and auto industries as well as other industries, but we’ll do these things in a measured manner. The Government realizes the significance of cooperation in these spheres, so naturally we‘re taking a realistic approach while considering our own opportunities.   

I repeat that all I’ve just said, all the measures I’ve mentioned are simply responses. We did not want this to happen, and I sincerely hope that our partners’ economic pragmatism will prevail over malevolent political considerations, that they will think matters over, rather than intimidate or impose restrictions on Russia, and that mutually profitable trade and economic cooperation will be restored to its former level. We would very much hope for that.


* * *

Briefing by Minister of Agriculture Nikolai Fyodorov following the Government meeting


Question: Yelena Mishina, ITAR-TASS. Mr Fyodorov, I have two questions for you. How much will support for the Russian agricultural industry increase now that it has taken on an additional load? The second question is about the technical enforcement of the sanctions, since Russia is part of the Customs Union, and neither Belarus, nor Kazakhstan, has imposed them.

Nikolai Fyodorov: With regard to providing additional support to the state programme for expanding agriculture, we have our own numbers, which we derived based on the threshold quantities indicated in the Food Security Doctrine, which was approved by a presidential decree back in 2010. We will use these numbers to work with our colleagues in the Government. As the President said and the Prime Minister confirmed today, we, despite all the difficulties and challenges, will have to look for additional resources to support domestic agricultural producers, in line with the doctrine and because of the sanctions.

Such support will also become available, because our industry associations in all major areas of agricultural production... We met with them on several occasions over the past few days, when the unfriendly countries in question tightened their requirements toward Russia. They provided their assessments of their resources that may become available for boosting agricultural production, and told us that by virtue of reduced food imports, Russia may produce an additional 281 billion roubles worth of agricultural products in the next 18 months. These are expert assessments of our industry associations, which require further evaluation by the Government and the Ministry of Agriculture. As is known, if something becomes scarce in one place, it must become plentiful in another. In fact, this decision by the Russian leadership gives us a unique chance to improve our agricultural sector.

To a degree, today’s situation (of course, not in form, but in content) seems similar to devaluation of the rouble in 1998, which allowed us to boost the agricultural sector and replace a large portion of substandard imported products, which were swamping the Russian consumer market in the mid-1990s, with domestic agricultural products.

With regard to protecting our interests and complying with the embargo in the Customs Union, we are actively negotiating this issue with our colleagues from Belarus and Kazakhstan. In fact, we do have mechanisms, and we will agree on more of them in order to remain compliant with the decisions that will be taken by Russia as a member of the Customs Union. We think that we will find a civilised way to block all possible threats to violation of the sanctions that Russia was forced to introduce.

Question: Andrei Belyakov, Interfax. Mr Fyodorov, is the list final? Can it be expanded? Could products, such as wine and other spirits, as well as cereals, canned goods, juices, and water, be added to it?

And a second question: how do you think inflation may be affected by the sanctions?

Nikolai Fyodorov: The list may be subject to certain changes, but, the way that I see it and understand our leadership’s vision of the situation, it won’t change in the near future most likely, at least it won’t expand. Certain items could be removed, though. In terms of cereals and the like – this is out of the question. In fact, as you are aware, this does not concern the list, but what the people behind the sanctions against Russia will say. It concerns what they think about our actions. I heard some EU representatives say that the sanctions imposed by Russia are counterproductive and unjustified, as if their own sanctions are productive and justified.

Today, early on into the Government meeting, the Prime Minister stated that the sanctions are a forced measure. We were forced to make these decisions. Russia did not respond after the first volley of sanctions and not even after the second volley. Only when they imposed sectoral sanctions that impacted important lending institutions, such as Sberbank, the Russian Agricultural Bank, and VTB, which are major lenders and investors in the state programme for expanding agriculture and ensuring food security, Russia took actions in response to such sanctions.

Without exaggeration, the sanctions against institutions that are critical to Russia’s agricultural sector threaten Russia’s food security. Indeed, in his executive order, the President mentions the law on economic and other security of the Russian state because when sanctions against Russia graduated to a level where they could eliminate the development institutions... This would paralyse all investment projects designed to industrialise the agricultural sector of the Russian economy and is fraught with the annihilation of a competitive Russian agricultural sector.

To put it mildly, these are rather unscrupulous competition methods. I am entitled to this kind of assessment as the Minister of Agriculture. When it came to security threats, both food and state security, the President was forced to make these decisions.

Once again, this might sound not too nice or even cynical, but sometimes they make us say so. Every cloud has a silver lining. The Russian farmers were given a great opportunity through the decisions of the President and the Government.

As I mentioned earlier, we now have the unique chance to improve our agricultural sector and make it more competitive. We will replace imports from the EU, the United States, and Canada with imports from our other partners. And we are going to do it not just for half a year or a year, but I think that we’ll be able to find long-term partners elsewhere – in the Asia-Pacific region, Latin America, and so on.

Question: What about inflation?

Nikolai Fyodorov: According to our estimates (surely, this is a sensitive, important and topical subject), we do not see any unfavorable impact on inflation – either in the long-term or the mid-term perspective – in the wake of the decisions that are made today. True, some short-term splashes – psychological, emotional (as is normally the case) or seasonal – are possible in our country, but we do not see a fundamental, strategic threat. The decisions made today are unlikely to provoke a negatively impact on inflationary expectations.

Question: Alexandra Bayazitova from the Izvestia newspaper. I have two questions to ask you. Will, in your opinion, agricultural producers be able to make use of that chance that the Prime Minister and you spoke about at their own expense or they will need credit leverage? And the second question. We know that the Central Bank is drafting its own plan to support agricultural producers. Is the Government also involved in the development of this plan, and what kind of support, credit support in particular, is actually meant?

Nikolai Fyodorov: Today, the Prime Minister specified that during all of his trips to various regions across our country, farmers called for import restrictions. I am returning to this subject. During virtually every meeting, farmers, Russian agrarians, would bring the matter up, directly or indirectly, saying: “Help us! Restrict agricultural imports!” That’s all they wanted. They wouldn’t ask for more money or more loans, etc. It’s true, and you agree with it. These forced import restrictions will help them a lot. There would be less competition on the market. These are favorable conditions helping farmers to develop their own businesses – this is an objective law that works for every branch. As I said, we have already drafted a new national agriculture development programme and submitted it to the Government for approval, and most of my colleagues in the Government have already coordinated it. The draft stipulates that we move more actively towards reaching the targeted levels of our food security doctrine. You’ve probably heard about that, it’s almost common knowledge, and the Prime Minister spoke about that. We have provided ourselves with grain, vegetable oil, sugar and potatoes in sufficient quantities to guarantee our food security. As for fish and water bio-resources, fish products, here the degree of provision approximates the targeted levels. We are making sound progress towards ensuring food security as regards meat and meat products. Poultry and pork production is developing at a very good pace. As for beef, we are ahead of schedule fixed in the state programme. We haven’t reached the targeted levels yet, which we are supposed to do by 2020 or by 2018 for certain products, but we are moving ahead of schedule. Things are slightly worse with milk and dairy products – that’s as far as basic foods are concerned. Considering the challenges that our country faces under volatile conditions, the Ministry of Agriculture has submitted its proposals for expanded Government support. In my opinion, the appearance of the President’s executive order under these new circumstances gives us additional arguments and hope that the proposals and calculations made by the Ministry of Agriculture will win the approval of our colleagues in the Government and, above all, from the Ministry of Finance, of course. I will tell you a secret. Our leadership (we discussed this subject) has a political and organisational awareness of and supports the need for additional injections of funds into the agrarian sector despite the fact that there will now be more room on the market.

Question: Bloomberg. Olga Tanas. I will ask you a few questions, if I may. Could you specify the share of banned products from countries that imposed sanctions on Russia in the total amount of food products imported by Russia? The second question. Which food products do you expect to be in short supply in the near future until you manage to substitute them with domestic ones and with which countries is Russia planning to expand cooperation and open new markets? What is it planning to import from Latin America, particularly from Brazil?

Nikolai Fyodorov: Our preliminary assessments are as follows. I even have a ready answer to your question (not specifically for you, but that’s what the Ministry of Agriculture has been doing under the current circumstances). Let me read our internal document. It is possible to substitute supplies of meat and meat products from the EU, the United States, Canada and Australia with supplies from Brazil (work has already begun; you have probably paid attention to the fact that we accredited 40 new enterprises from Brazil), plus from Uruguay, Paraguay, Argentina, and Belarus; cheese, butter and powered milk – with supplies from South American countries and New Zealand; vegetables – with supplies from Turkey, Argentina, Chile, China, Uzbekistan, Azerbaijan; apples and pears – with those from Argentina, Chile, China and Serbia; cherries, sweet cherries, apricots, peaches – with those from Uzbekistan, Azerbaijan, Armenia, Tajikistan, Israel, Turkey, Iran; citrus fruit – with supplies from Egypt, Morocco, Turkey, and South Africa.

The share of our food supply consisting of imports will shrink. But look at our present-day statistics. Russia’s beef consumption stands at 2.345 million tonnes [a year], of which the EU, the United States and Canada put together account for a mere 59,000 tonnes. Moreover, Brazil and some other countries have begun beef exports to Russia. Here are the figures for pork: 450,000 tonnes out of the total 3.415 million tonnes – nothing critical; for poultry meat, a negligible 338,000 out of 4.28 million tonnes; and for fish, 457,000 tonnes out of total consumption exceeding 3.44 million tonnes. Indicatively, Russia exports 1.8 million tonnes of fish and derivative products, compared to 700,000 tonnes that it imports. This means that we can settle the problem very quickly, and the end consumers will not even see the difference. Next, the above-mentioned countries account for 459,000 tonnes out of 36 million tonnes of dairy products; 900,000 tonnes out of 16 million tonnes of vegetables; and 1.6 million tonnes of fruit and berries out of the total consumption of 11 million tonnes. So the share is not significant for any item. These are the basic indicators; nothing to worry about, as we are making this decision very responsibly. We will compensate for the decrease with the help of deliveries from other countries.

Question: There was another question: what shortages in foodstuffs can we expect soon?

Nikolai Fyodorov: I posed this question to all my colleagues and our partners, and no one could say for sure what foodstuffs might be undersupplied. We may have certain shortages somewhat later, but we don’t think the latest decisions will cause them. I say this on the authority of experts we collaborate with, mainly research institute experts and representatives of industrial unions we rely upon.

Question: Denis Ichyotkin, ITAR-TASS. Mr Fyodorov, the European Union is declaring even now its intention to challenge, according to the WTO procedures, the sanctions announced today. You are a lawyer. What are the prospects of this suit, in your mind? At the same time, Russia intended to challenge the sanctions against it, within the WTO framework, as was announced before. Have proceedings been launched? If so, what stage are they at now?

Nikolai Fyodorov: This is certainly a legal matter, but our partners don’t abide by the law closely, either out of sheer habit or as a result of a cynical attitude toward international relations. I think any independent expert will agree with me on that point.

You are addressing me not only as a minister but also as a lawyer. True, I am a lawyer, born and bred, and hackneyed phrases about double standards cause me pain. Compliance with legal procedures is treated very cynically. This is the opposing party’s stance: “When we pursue our partners’ interests, we don’t need to comply with the legal procedure, but we should insist on closer compliance when it comes to Russia’s interests.” Everyone knows these double standards and is accustomed to them. Even proceeding from them, the Russian authorities’ decisions have a solid legal foundation.

I will not make a detailed comment here on the WTO regulations. You might remember GATT (the General Agreement on Tariffs and Trade), Article XXI. It implies that whatever agreements and pledges the countries joining the WTO might make should not run counter to the interests of food, economic and any other kind of security of the WTO member states. So we can back up our position legally. Clearly, our opponents can also refer to the procedures the WTO envisages. We are ready to take part in relevant consultations and debates, and to substantiate our point.

A third wave of sanctions against Russia’s state and national interests has begun. Russia is responding to them adequately and legally, in compliance with the WTO rules and procedures. This is where we are proceeding from.

Question: Maksim Tovkailo, Vedomosti. First, let me ask you a few short “yes or no” questions.

If we understood the Prime Minister correctly, the ban does not extend to individuals bringing in goods from countries on Russia’s sanctions list (goods that are banned) for personal use, is that correct?

Nikolai Fyodorov: Yes, I can assure you that this is correct. The customs regulations remain the same for goods brought in for personal use.

Question: Salmon from Norway is now banned. I could be mistaken, but as a consumer I believe most of the salmon we see in stores is from Norway. Is that correct? Do we have alternatives to replace Norwegian fish?

Nikolai Fyodorov: I think you are right. The percent of Norwegian fish and fish products is pretty high among imports. But I simply presented general figures. We export almost two million tonnes of aquatic biological resources, including salmon and red caviar. We import about 600,000 to 700,000 tonnes. This means, of course, we’ll have to make up for the difference. We did not simply discuss this with retail chains, but we are preparing to sign an agreement on reorganizing the distribution system in the regions that usually get their seafood from Norway. These products could be replaced by Russian fish and seafood or products from other countries that could competitively replace Norwegian products.

Question: Is Switzerland included in sanctions as a member of the European Union?

Nikolai Fyodorov: Switzerland is not a member of the European Union. Yes, we have talked about this. Journalists have been wondering about Switzerland and Japan. The sanctions do not cover them.

Question: You spoke about financial aid for the agriculture industry. Is it true that Rosselkhozbank addressed the Ministry of Agriculture and the Government with a request to increase its capital by 50 billion roubles as soon as possible and place a deposit of 100 billion roubles in the bank? The other question regards the report about the programme. How much more agriculture industry funding does the Ministry of Agriculture propose, at least within this plan, for the next three years?

Nikolai Fyodorov: We’re talking about an additional 137 billion roubles for the farming industry within the next three or four years. This figure is based on our estimates, not the latest decisions. Our experts were discussing what we’ll lose and how quickly it can be replaced by Russian products, because products from the five subjects of international law will be temporarily unavailable.

Speaking of Rosselkhozbank, after an extensive discussion with all involved representatives and industrial unions, the Minister of Agriculture presented his proposals regarding the bank’s request to increase its capital by 77 billion roubles until 2020. This is not a confidential figure. I think it was mentioned in an expert discussion. Clearly, as usual, Rosselkhozbank is in a situation where it would ask for more, but based on our estimates, the ministry decided on 77 billion roubles.

Question: Do you see risks in the attempts to limit grain exports from Russia in response to the adopted measures, and what are these risks? And in general, what is your prediction for exports, considering the grain harvest may reach 100 million tonnes?

Nikolai Fyodorov: Who is limiting exports?

Remark: The countries against which these measures are directed.

Nikolai Fyodorov: For the most part, we export grain not to Canada, the United States and the European Union, but to the Middle East, Africa and Asia. These countries are friendly to us in this case. We are now in the process of determining our attitude toward unfriendly actions. So our grain market and grain exports are fairly predictable and, strange as it may seem, the situation is even better as a result of these unpleasant circumstances.

We have better prospects when it comes to expanding cooperation with other countries. As a minister, I see these prospects and certain adjustments in international cooperation in the long-term perspective. Everything that is happening today, strange though it may seem, has a positive aspect and  will help us diversify our cooperation. Of course, the European Union is more convenient, but for how long can we simply enjoy the convenience of this market because it is good and geographically close? I’m convinced that the Asia-Pacific Region and the Middle East have more prospects for Russia’s food market.

Remark: What about your forecast of exports…

Nikolai Fyodorov: We don’t yet have grounds to change our forecasts much for the production and export of grain. We’ll be able to export 25 million tonnes of grain in this agricultural year. According to today’s estimate, the forecast for our grain harvest – let me touch wood – is about 100 million tonnes. If you saw our website, you'll know that we are already ahead of the past year in grain by over 14 million tonnes, and in wheat by more than 10 million tonnes. The past year was not bad, whereas the year before it was difficult.

Question: Alexander Orlov, Mr Fyodorov, do you think that a ban on some foods, for instance, Aberdeen Angus beef, could negatively affect the restaurant business?

Nikolai Fyodorov: I’ve mentioned the numbers. Consumption of beef, and, in fact, all cattle meat from these countries, is merely 59,000 tonnes. We are already holding talks with other countries and even signing contracts on meat supplies with them, and I’m absolutely sure that consumers of marble meat and high quality beef won’t suffer. They won’t even notice that anything is happening in Russia’s trade with the EU countries, Canada or the United States. I want to reassure you that you won’t notice a lack of high quality beef. You are used to eating in good restaurants (judging by your concern about their patrons), and you’ll continue doing so. Bon appétit!

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